Fewer Individuals Prosecuted As Government Fraud Settlements Increase

December 14, 2012

Fewer Individuals Prosecuted As Government Fraud Settlements Increase

When a business sells goods or services to the federal government in a fraudulent manner, the business and potentially individuals who run the business may be liable for civil and criminal penalties. Cases of fraud against the federal government are brought under the False Claims Act and third parties who suspect defrauding of the government, known as whistleblowers, may also file actions. In recent years, there has been an increase in settlements, and the Justice Department has collected more in fines than at other point in history. So far, few federal government fraud cases involve the prosecution of individuals running the businesses, but lawmakers, the Obama Administration and government watchdog groups are pushing for more individuals to be held responsible.

Over the last three years, the Department of Justice has collected $8.6 billion to resolve federal government fraud cases and this year alone the Justice Department is on track to collect $8 billion - more than twice the amount collected last year. The growth in amounts collected for defrauding the federal government are the result of a realignment of resources within the Justice Department, higher penalties for companies that commit wrongdoing, and an increase in whistle-blower complaints.

Examples of companies that have been the target in government fraud cases include large pharmaceutical, defense and financial companies. According to an article on government fraud in The New York Times, Oracle, the hardware and software company, agreed to pay nearly $200 million to settle a claim of overbilling the government for software in October of last year. One month later Merck, the drug maker and chemicals company, settled charges of drug marketing and safety fraud for nearly $1 billion. This year ATK Launch Systems, a military contractor, agreed to pay $37 million to settle a case where the contractor sold dangerous and defective flares to the military, and GlaxoSmithKline recently agreed to pay $3 billion to settle criminal and civil allegations involving pricing and drug marketing fraud. Commonly, individuals making decisions at companies involved in fraud settlements with the government are not the subject of prosecution. The Justice Department and some legal experts differ on why individuals have not been pursued.

Experts assert the federal government seeks actions against companies because of their deeper pockets. According to The New York Times, the government recovers $15 for every $1 spent on a lawsuit against a company. Therefore, a civil action that is settled can produce a high return without seeing the action more expensively concluded in court, which may not result in a ruling favoring the government. In addition, claims in a civil action are proven at a lower burden of proof than criminal charges, which relates to the government's reasoning to pursue actions against companies rather than individuals.

One government official's viewpoint, according to an interview in The New York Times, is that it's often too difficult and expensive to pursue a criminal investigation of an individual. It can be hard to link individual actions to corporate wrongdoing because officers and senior management that may be targeted are usually closed off from everyday decisions and actions and have learned to shy away from communications that may demonstrate they knew the company was in violation of the law.

Officially, the Justice Department says its prosecutors assess the evidence of each case and the likelihood of success at trial to determine whether to bring criminal charges against individuals. Critics of the Department of Justice's practice of settling fraud cases with companies and not charging any employees argue the practice may encourage executives to push the limits of the law while knowing the likelihood of being prosecuted is low. The Justice Department holds that an investigation of an individual may be brought or continue even if the individual's company has settled the case.

If you are the subject of fraud or another white collar crime, contact an experienced criminal defense attorney to protect your rights.

Article provided by Sherick & Bleier P.L.L.C.
Visit us at http://www.shericklaw.com